Empire State to Become REIT? Plans $1B IPO

Malkin Holdings L.L.C., supervisor of Empire State Building Associates L.L.C., owner of the world-renowned Empire State Building in Manhattan, has gotten everyone's attention with the revelation -- in documents filed with the Securities and Exchange Commission -- that ESB Associates plans to become a REIT.

Malkin Holdings L.L.C., supervisor of Empire State Building Associates L.L.C., owner of the world-renowned Empire State Building in Manhattan, has gotten everyone’s attention with the revelation — in documents filed with the Securities and Exchange Commission — that ESB Associates plans to become a REIT.

As per the SEC document, ESB Associates would consolidate into a REIT, Empire State Realty Trust Inc., with a portfolio that encompasses 18 office and retail properties, including the 2.9 million-square-foot Empire State Building, which has an appraised property value of just over $2.5 billion.

Upon completion of the offering of the Class A shares, the REIT will have outstanding debt totaling just over $1 billion, $179.1 million of borrowing capacity and, as noted in the filing, “a strong balance sheet well positioned for future growth.

According to reports, the IPO is expected to yield as much as $1 billion.

It’s a good time to go REIT. According to a report by the National Association of Real Estate Investment Trusts, in 2011, REITs raised $51.3 billion in public equity and debt, beating the 2006 record of $49 billion by far more than a hair. Approximately $37.5 billion of the capital raised was in public equity; the previous record for REIT equity offerings was $32.7 billion back in 1997.

“The strong, continuing income stream from REITs is an important component of the appeal of REIT shares for investors,” Steven A. Wechsler, president and CEO of NAREIT, said. “REIT dividends boost an investment portfolio’s performance in good times and help insulate it from downside shocks in turbulent market conditions.”